Good Morning, Traders. Volatility contraction leads to volatility expansion. Say it with me now.... Look at the chart above. Something is up. Something is going to happen. There she consolidates, steady as she goes, which way she'll break out, no one knows.... As of this writing, new Fed chief Benjamin Bernanke has not yet commenced his speech in New York at 7pm EST, March 20th. Could the market be waiting for a sign from the Fed before breaking in either direction? Could be. Watch futures action this morning on globex in the premarket, any action below the horizonatal line should bring in some sellers and vice versa. We've had three straight days of "winding up" where bulls are bears are fighting it out as to whether its higher from here right away or pullback first. Certainly the correction by time and not price that we have been experiencing since March 16 would have to be construed as bullish. Anytime prices don't pullback and just hold at highs is a positive sign. Should be a relatively obvious (is it ever?) trade today, favoring longs if the S&P is above the upper horizontal blue line and short if its below.

Everything about yesterday's market action confirms the indecision at this level. Top line figures as we call them closed split, with the Dow and S&P shedding a bit and the Nasdaq gaining. Breadth as measured by the ratio of advancing volume to declining volume was mixed and closed negative on the NYSE and positive on the Nasdaq. Advancers vs decliners tallies were also out of sych on the exchanges, and the ShadowTrader Core Sector List finished the session in Christmas tree formation (half of the sectors closing down on the day (red) and half up (green). Keep your ear to the Bloomberg and lets see what today brings.

Peter Reznicek is the Chief Equity Strategist and a principal of the Prana Fund, a domestic hedge fund, and ShadowTrader, a subsidiary of thinkorswim which provides coaching and education to its clients on both intraday and swing trading of equities. For a free trial to the full version of The Big Picture or to learn about ShadowTrader's other services, visit shadowtrader.net or send an email to preznicek@shadowtrader.net.